The possibility of liquidating assets used in a capital project are modeled as a "put" option in order to properly incorporate the qualities of the assets in the total valuation and assessment of risk in the project. Where assets can be diverted to other uses, abandonment of the project carries less risk than if the assets expired.
investment, asset flexibility, durability
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Kensinger, John W., "Project Abandonment as a put Option: Dealing with the Capital Investment Decision and Operating Risk Using Option Pricing Theory" (1980). Working Papers. 5.